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UCC Article 9: What You Need to Know, Part 1

If you’re a business owner, you’ve been using the Uniform Commercial Code (UCC) even if you’ve never heard of it. The UCC is a model body of law adopted by all 50 states and US territories in a generally uniform manner that governs commercial business transactions, although there are slight differences between the states. The UCC is divided up into eleven separate sections or “Articles” that each govern a different set of transactions.

What kind of transactions are governed by the UCC? Here’s a short list: selling goods, leasing equipment, issuing promissory notes, sending purchase orders, writing checks, opening bank accounts, shipping goods, and finance transactions where a loan is secured by collateral. This blog series will deal with finance transactions, which are covered by UCC Article 9.

As a business owner, why should you care about UCC Article 9? The answer is simple: whenever you enter into a financing arrangement, equipment lease or any transaction where an obligation is secured by collateral, UCC Article 9 is there in the background to protect you as long as the documents and agreements comply with its provisions. If you are entering into a transaction where you will provide financing, you’ll need to have a basic understanding of how UCC Article 9 helps protect your interest in the collateral. As you might expect, UCC Article 9 is a complicated statute, and you’ll need the help of a professional to navigate it. If you’re a lender, you’ll want to make sure the documents you are using have been vetted by an attorney so they comply with the UCC in your state. If you’re a borrower, you’ll want to hire a lawyer to confirm the documents aren’t overreaching and include the protections offered by the UCC.

Because UCC Article 9 touches so many different kinds of transactions, a general understanding of how it works and what to look for will benefit you regardless of whether you’re a lender, borrower, buyer or seller.

Clint M. Hanni is Of Counsel to Richards Brandt Miller Nelson. He is a member of the Business Transactions & Corporate Governance, Banking and Finance Law, Business Bankruptcy and Creditor Rights, and Real Estate Transactions & Litigation practice groups.